EYE On STOCK

PARAMOUNT Corp Bhd’s (code: 1724) correction from a historical high of RM2.26 on Oct 4 found support at the RM2 mark.

The 11.5% pullback ended the stock’s staggered rise although the daily price chart suggests that this may just be another temporary setback before it resumes higher levels of trading. The counter is currently undergoing consolidation but it remains on solid footing and trading ahead of the long-term simple moving averages (SMA).

Year-to-date, Paramount’s share price has risen about 18% as at yesterday’s close. This positive trend over 2018 thus far has given the stock a healthy medium-term outlook that a brief decline such as the one experienced over the past month has not changed.

To regain a more bullish near-term outlook, however, the share price needs to rise past the 50-day SMA near the RM2.10 mark and let the bulls resume control.

Based on yesterday’s performance, the stock looks set to trade with an upside bias within the RM2 to RM2.10 range.

The technical indicators are showing some build-up of positive momentum, which should take the share price to the upper limit of the trading range. A break out, however, remains to be seen. The slow-stochastic momentum index is showing bullish momentum, rising from under the oversold line to 39 points. The 14-day relative strength index also shows the same bullish momentum, bouncing off the oversold line to rise above 50 points.

The daily moving average convergence divergence line, however, remains uncommitted albeit improving. It has come closer to the signal line but falls short of a positive crossing, which would indicate a “buy” signal and the return to a positive trend.

As earlier stated, the immediate resistance rests on the RM2.10 mark. A convincing crossing of the hurdle would see the stock aiming for the RM2.20 mark and unlocking the possibility of its return to the historical high of RM2.26. There are some risks visible on the lower end of the chart as a couple of unfilled trading gaps may draw investors towards closing them. While the immediate support sits at RM2, a spate of profit-taking may see investors erase the steep advance seen in the last week of August and return to a support as low as RM1.90.

The comments above do not represent a recommendation to buy or sell.